Tracsis plc (TRCS) Earnings Call Transcript & Summary

We've seen very high activity levels across the group, which has enabled us to deliver a strong set of results. That very high activity level is really underpinned in the delivery of some important enterprise software contracts, which has enabled us to grow our annual recurring revenue across the group, which is great, and that's very much in line with our strategic objective. We've also really importantly seen strong growth in North America following the acquisition of RailComm in March of last year. And we've also seen really strong growth in our smart ticketing business, in our digital railway business. And in particular, we've seen record demand for Remote Condition Monitoring in the period. And then in addition, we are starting to see a real interest in data, the insights that you can get from that data and how that can be used across the industries in which we operate to make really important strategic decisions around investment and around operational efficiency. Alongside that, we've continued our initiatives to implement One Tracsis, which basically is around simplifying the structure of the group, and it's about strengthening our SaaS delivery capabilities so that we continue to accelerate the growth of the business moving forward. And then finally, we are really well positioned with a strong balance sheet to continue to invest in acquisition but also, importantly, to invest in early-stage R&D, where we're seeing lots of interest from across the industries in which we operate. And we will obviously look to invest in those areas to continue the growth of the group.

We've seen very strong revenue growth in the group. Total revenue was up 34% to GBP 39.2 million, and that reflects organic growth of 13%. And really importantly for us, it includes an increase in annual recurring revenue on the Rail Technology and Services Division that was up 16% to GBP 10.8 million for the first half. In the rail division, we saw overall strong revenue growth of 69%. That reflects 25% organic growth. And when we look across the component parts of that division in operations and planning, we saw the benefit of the TRACS Enterprise contract wins from the prior year as well as our first license deployment in North America for a new product that's aimed in the transit market. In Digital Railway and Infrastructure, we've seen very strong demand for Remote Condition Monitoring. Revenue in that part of the group was 46% higher than the first half last year. And we also saw double-digit revenue growth in our safety and risk management software business. And in Customer Experience, we've seen very strong revenue growth as well. That's reflecting both the contracts that we won last year and some new contract wins in the first half as well as increased levels of transactional delay repay revenue. On the Data Analytics, Consultancy & Events division, it's a similar story. We've seen high activity levels in each part of the division. We're really pleased to say that the Traffic Data and Events businesses that were most impacted by COVID, we've seen activity levels there fully returned to their pre-COVID levels, and our team has done a great job there in order to respond to that. And equally, on the data analytics, GIS and consultancy parts of the group, we've seen high activity levels that supported strong revenue growth. Revenue growth has resulted in a 21% increase in EBITDA to GBP 7.5 million. And from a balance sheet perspective, we closed the half with GBP 17 million of cash and no debt. We expect that we'll pay approximately GBP 8.5 million in contingent consideration in the second half of this financial year. That is the final tranche of the majority of our earnouts for old acquisitions. The group remains very cash generative, particularly in the second half of the year. So that leaves us really well positioned to continue to invest in growing the group organically and through acquisition.

We've made really good progress in the period across a number of key areas. The first of those key areas is in organic growth, and we see really strong organic growth across the group. And what's particularly pleasing is the growth that we've seen across our software portfolio. That's across both our operations and planning software, across Remote Condition Monitoring, across smart ticketing and across our safety and risk management platform, which is really pleasing to see. And that puts us in a really strong position moving forward. We continue to expand our addressable markets. So 12 months ago, we bought RailComm in North America, and we've seen really strong performance from them in the first half of this year. And alongside that, we've also seen really good growth in our Events and Traffic Data business and across our consultancy and data analytics and GIS business, which is really pleasing. We continue to look at a range of acquisition opportunities, and we have a strong balance sheet to do that. We've also made good progress in implementing our One Tracsis strategy. So 12 months ago, we made a commitment to be carbon-neutral by 2030. And in the period, we have integrated together our Events and our Traffic Data business units, which are what carry the majority of our CO2 output from across the group, and that will enable us to move very quickly now towards achieving that objective over the coming years.

We've seen a good start to trading in Q3, in line with our expectations, and that reflects continued high activity levels in all areas of the group and a growing pipeline of opportunities across our core markets in the U.K., in Ireland and in North America. We continue to proactively pursue M&A opportunities, and we're seeing a growing pipeline of early product R&D opportunities that we will invest in where we can see opportunities for attractive returns. The industrial action we've seen in the U.K. rail industry has created some near-term uncertainty around, particularly, procurement and delivery time lines. But the product and services that Tracsis offers right across the group have really clear benefits cases and are very closely aligned with the macro drivers of digital transformation and increasing use of data that support our customers in making better decisions, improved efficiencies and better ESG and health and safety outcomes. So whilst there may be a little bit of near-term uncertainty, we're very closely aligned to those longer-term drivers that are relevant in both the U.K. and the North American markets. And that's what gives us confidence in the prospects for the group, both in the second half of this year and in the longer term.